<PAGE>

================================================================================


                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                               ________________

                                   FORM 10-Q
                               ________________

                                  (Mark One)

        [X]     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                       SECURITIES EXCHANGE ACT OF 1934.

                 For the quarterly period ended March 31, 2000

                                      OR

       [_]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                       SECURITIES EXCHANGE ACT OF 1934.

         For the transition period from ____________ to ____________.

                       Commission file number:  0-27207

                            VITRIA TECHNOLOGY, INC.
            (Exact Name of Registrant as Specified in Its Charter)

                   Delaware                             77-0386311

        (State or Other Jurisdiction of              (I.R.S. Employer
       Incorporation or Organization)               Identification No.)

                               945 Stewart Drive
                          Sunnyvale, California 94086
                                (408) 212-2700
   (Address, including Zip Code, of Registrant's Principal Executive Offices
            and Registrant's Telephone Number, including Area Code)

                               ________________

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]

     The number of shares of Vitria's common stock, $.001 par value, outstanding
as of April 24, 2000 was  126,978,292 shares.

                                       1
<PAGE>

VITRIA  TECHNOLOGY, INC.

<TABLE>
<CAPTION>
Index                                                                                             Page
<S>                                                                                               <C>
PART I:  FINANCIAL INFORMATION

Item 1.  Condensed Consolidated Financial Statements and Notes

         Condensed Consolidated Balance Sheets at March 31, 2000 and December 31, 1999              3

         Condensed Consolidated Statements of Operations for the three months ended
              March 31, 2000 and March 31, 1999                                                     4

         Condensed Consolidated Statements of Cash Flows for the three months ended
              March 31, 2000 and March 31, 1999                                                     5

         Notes to the Condensed Consolidated Financial Statements                                   6

Item 2:  Management's Discussion and Analysis of Financial Condition and Results of Operations      8

Item 3:  Quantitative and Qualitative Disclosures About Market Risk                                13

PART II: Other  Information

Item 2:  Changes in Securities and Uses of Proceeds                                                23

Item 6:  Exhibits and Reports on Form 8-K                                                          23

Signature                                                                                          24
</TABLE>

                                       2
<PAGE>

PART I.  FINANCIAL INFORMATION

ITEM 1. Financial Statements

                            Vitria Technology Inc.
                     Condensed Consolidated Balance Sheets
                                (in thousands)

<TABLE>
<CAPTION>
                                                                  March 31,                December 31,
                                                                    2000                      1999
                                                         ------------------------    ----------------------
                                                                (unaudited)                  (Note 1)
<S>                                                      <C>                         <C>
                          Assets
Current Assets:
  Cash and cash equivalents                              $                188,016    $               52,218
   Short-term investments                                                  59,070                    13,231
  Accounts receivable, net                                                 23,263                    11,443
  Other current assets                                                      9,217                     4,389
                                                         ------------------------    ----------------------
    Total current assets                                                  279,566                    81,281
Property and equipment, net                                                 5,449                     4,452
Other assets                                                                  805                       761
                                                         ------------------------    ----------------------
    Total Assets                                         $                285,820    $               86,494
                                                         ========================    ======================


              Liabilities and Stockholders' Equity
Current Liabilities:
  Accounts payable                                       $                    662    $                  401
  Accrued payroll and related                                               9,013                     5,266
  Accrued professional services                                             1,766                     1,191
  Other accrued liabilities                                                 5,605                     4,559
  Deferred revenue                                                         38,912                    15,627
                                                         ------------------------    ----------------------
    Total current liabilities                                              55,958                    27,044

Stockholders' Equity:
   Common stock                                                               127                       124
   Additional paid-in capital                                             262,405                    91,228
   Accumulated other comprehensive loss                                       (61)                      (54)
   Unearned stock-based compensation                                       (6,159)                   (7,223)
   Notes receivable                                                          (291)                     (291)
   Accumulated deficit                                                    (26,159)                  (24,334)
                                                         ------------------------    ----------------------
     Total stockholders' equity                                           229,862                    59,450
                                                         ------------------------    ----------------------


     Total liabilities and stockholders' equity          $                285,820    $               86,494
                                                         ========================    ======================
</TABLE>

 The accompanying notes are an integral part of these condensed consolidated
                             financial statements.

                                       3
<PAGE>

                            Vitria Technology, Inc.
                Condensed Consolidated Statements of Operations
                   (in thousands, except per share amounts)
                                  (unaudited)

<TABLE>
<CAPTION>
                                                 Three months ended
                                                       March 31,
                                                2000             1999
                                          ---------------   --------------
<S>                                       <C>               <C>
Revenues:
 License                                  $        16,318   $        3,487
 Service                                            4,133            1,472
 Government grant                                      84              250
                                          ---------------   --------------
   Total revenues                                  20,535            5,209

Cost of sales:
 License                                              383               62
 Service                                            3,609            1,294
 Government grant                                      84              250
                                          ---------------   --------------
   Total cost of sales                              4,076            1,606

                                          ---------------   --------------
Gross profit                                       16,459            3,603

Operating expenses:
 Sales and marketing                               11,662            2,889
 Research and development                           5,282            1,961
 General and administrative                         2,189              726
 Amortization of stock-based compensation           1,064              867
                                          ---------------   --------------
   Total operating expenses                        20,197            6,443
                                          ---------------   --------------


Loss from operations                               (3,738)          (2,840)
Other income, net                                   1,913              129
                                          ---------------   --------------
Net loss                                  $        (1,825)  $       (2,711)
                                          ===============   ==============


Basic and diluted net loss per share      $         (0.02)  $        (0.06)
                                          ===============   ==============


Weighted average shares used in computing
 and diluted net loss per share                   119,557           48,579
                                          ===============   ==============
</TABLE>

        The accompanying notes are an integral part of these condensed
                      consolidated financial statements.

                                       4
<PAGE>

                            Vitria Technology, Inc.
                Condensed Consolidated Statements of Cash Flows
                                (in thousands)
                                  (unaudited)

<TABLE>
<CAPTION>
                                                                                      Three months ended
                                                                                   March 31,         March 31,
                                                                                     2000              1999
                                                                                ------------       -----------
<S>                                                                             <C>                <C>
Cash flows from operating activities:
 Net loss                                                                       $   (1,825)        $   (2,711)
 Adjustments to reconcile net loss to net cash
   provided by (used in) operating activities:
     Depreciation and amortization                                                      545               159
     Amortization of deferred stock compensation                                      1,064               867
     Provision for doubtful accounts                                                    543               118
     Changes in assets & liabilities:
      Accounts receivable                                                           (12,363)              600
      Other current assets                                                           (4,828)             (110)
      Other assets                                                                      (44)              (55)
      Accounts payable                                                                  261              (426)
      Accrued liabilities                                                             5,368              (370)
      Deferred revenue                                                               23,285               403
                                                                                -----------        ----------
         Net cash provided by (used in) operating activities                         12,006            (1,525)
                                                                                -----------        ----------

Cash flows from investing activities:
  Purchases of  property and equipment                                               (1,542)             (299)
  Purchases of  investments                                                         (73,416)                -
  Maturities of investments                                                          27,577                 -
                                                                                -----------        ----------
      Net cash used in investing activities                                         (47,381)             (299)
                                                                                -----------        ----------

Cash flows from financing activities:
  Proceeds from issuance of convertible preferred stock, net                              -               420
  Proceeds from issuance of common stock, net                                       171,180                56
                                                                                -----------        ----------
      Net cash provided by financing activities                                     171,180               476
                                                                                -----------        ----------

Foreign currency translation adjustment                                                  (7)                -


Net increase(decrease) in cash and cash equivalents                                 135,798            (1,348)

Cash and cash equivalents at beginning of period                                     52,218            12,792
                                                                                -----------        ----------

Cash and cash equivalents at end of period                                      $   188,016        $   11,444
                                                                                ===========        ==========
</TABLE>


 The accompanying notes are an integral part of these condensed consolidated
                             financial statements.

                                       5
<PAGE>

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1) Basis of Presentation

     The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim consolidated financial information and with the instructions for Form
10-Q and Article 10 of Regulation S-X.  In the Company's opinion, these
condensed consolidated financial statements include all adjustments, consisting
only of normal recurring adjustments, which the Company considers necessary to
fairly state the Company's financial position and the results of its operations
and its cash flows.  The balance sheet at December 31, 1999 has been derived
from the audited consolidated financial statements at that date but does not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements.  The accompanying
condensed consolidated financial statements should be read in conjunction with
the financial statements and notes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1999.   The results of the
Company's operations for any interim period are not necessarily indicative of
the results of the Company's operations for any other interim period or for a
full fiscal year.

2) Net Loss Per Share

     The Company computes net loss per share in accordance with SFAS No. 128,
Earnings Per Share, and SEC Staff Accounting Bulletin No. 98, ("SAB 98").  Under
the provisions of SFAS No. 128 and SAB 98, basic and diluted net loss per share
is computed by dividing the net loss for the period by the weighted average
number of shares of common stock outstanding during the period, less the
weighted average number of shares subject to repurchase.  The calculation of
diluted net loss per share excludes potential common shares if the effect is
antidilutive.  Potential common shares are composed of common stock subject to
repurchase rights and incremental shares of common stock issuable upon the
exercise of stock options and warrants.  For the three  months ended March 31,
2000 and March 31, 1999, potential common shares  totalled  19,683,000 and
57,792,000 respectively, and are excluded from the determination of diluted net
loss per share as the effect of such shares on a weighted average basis is
antidilutive.

     The following table sets forth the computation of basic and diluted net
loss per share for the periods indicated (in thousands, except per share
amounts):

(in thousands, except per share amounts)

                                                     Three months ended
                                                          March 31,
                                                   2000               1999
                                             ---------------     -------------
Net loss                                     $        (1,825)    $      (2,711)
                                             ===============     =============
Basic and diluted
  Weighted average shares of common stock
    outstanding                                      125,247            61,073
  Less: weighted average common shares
    subject to repurchase                             (5,690)          (12,494)
                                             ---------------     -------------
Weighted average shares used in computing
    basic and diluted net loss per share             119,557            48,579
                                             ===============     =============
Basic and diluted net loss per share         $         (0.02)         $  (0.06)
                                             ===============     =============

                                       6
<PAGE>

3) Comprehensive Income

     Comprehensive income is comprised of net income (loss) and other
comprehensive earnings such as foreign currency translation gain/loss and
unrealized gains or losses on available-for-sale marketable securities. Vitria's
total comprehensive earnings (losses) were as follows (in thousands):

                                                     Three months
                                                        ended
                                                       March 31,
                                                 2000            1999
                                           ---------------   --------------

Net loss                                   $        (1,825)  $       (2,711)
Other comprehensive income:
 Foreign translation adjustment                         (7)               -
                                           ---------------   --------------

  Comprehensive net income (loss)          $        (1,832)  $       (2,711)
                                           ===============   ==============


4) Recent Accounting Pronouncements

     In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivatives and Hedging Activities" ("SFAS 133").  SFAS 133, as
ammended,  is effective for the Company's 2001 fiscal year.  SFAS 133
establishes accounting and reporting standards of derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. The Company will adopt SFAS 133 in its quarter ending March
31, 2001 and does not expect such adoption to have an impact on the Company's
results of operations, financial position or cash flows.

     In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements"
("SAB 101"), and amended it in March 2000.  The Company is required to adopt the
provision of SAB 101 in its fiscal quarter ended June 30, 2000.  The Company is
currently reviewing the provisions of SAB 101 and has not fully assessed the
impact of its adoption.

5) Follow-on Offering

     In February 2000, the Company completed a follow-on public offering of
3,000,000 shares of common stock and realized proceeds, net of underwriting
discounts, commissions and issuance costs, of $171.2 million.

6. Stock Split

     In March 2000, the Company's Board of Directors approved a two for one
stock split of the Company's common stock. This stock split was effected in the
form of a dividend for all holders of the Company's common stock as of March 22,
2000 and distributed in April 2000. All share and per share amounts have been
restated for all periods presented to reflect this stock split.

                                       7
<PAGE>

ITEM 2:  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

     The information in this discussion contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934.  These statements relate to future
events or our future financial performance. In some cases, you can identify
forward-looking statements by terminology including "anticipates," "believes,"
"continue," "could," "estimates," "expects," "intends," "may," "plans,"
"potential," "predicts," "should" or "will" or the negative of these terms or
other comparable terminology. These statements are only predictions and involve
known and unknown risks, uncertainties and other factors, including the risks
outlined under "Business Risks," that may cause our or our industry's actual
results, levels of activity, performance or achievements to be materially
different from any future results, levels or activity, performance or
achievements expressed or implied by these forward-looking statements.

     Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements.

OVERVIEW

     We are a leading provider of eBusiness infrastructure software. eBusiness
refers to the use of the Internet to conduct business with customers and
partners. Our product, BusinessWare, provides the infrastructure that enables
incompatible information technology systems to exchange information over
corporate networks and the Internet. BusinessWare enables this exchange to take
place automatically, without human intervention. This eliminates manual entry of
information into multiple IT systems and eliminates the need to manually
exchange information with customers and business partners.

     Our revenues are derived primarily from license fees and services. Our
product is typically licensed directly to customers for a perpetual term, with
pricing based on the number of systems or applications managed. We record
license revenues when a license agreement has been signed by both parties, the
fee is fixed and determinable, collection of the fee is probable, and delivery
of our product has occurred. For electronic transmissions, we consider our
product to have been delivered when the access code to download the software
from the Internet has been provided to the customer. Payments received in
advance of revenue recognition are recorded as deferred revenue.

     Service revenues include product maintenance, consulting and training.
Customers who license BusinessWare normally purchase maintenance contracts.
These contracts provide unspecified software upgrades and technical support over
a specified term, typically twelve months. Maintenance contracts are usually
paid in advance, and revenues from these contracts are recognized ratably over
the term of the contract.

     We market our product through our direct sales force, and augment our
marketing efforts through relationships with system integrators, value-added
resellers and technology vendors. We opened an office in the United Kingdom in
June 1999, offices in Germany and Japan in March 2000, and plan to expand
further into Europe and the Asia Pacific region in this fiscal year.

     A relatively small number of customers account for a significant portion of
our total revenues. As a result, the loss or delay of individual orders can have
a significant impact on our revenues. We expect that revenues from a limited
number of customers will continue to account for a large percentage of total
revenues in future quarters. Our ability to attract new customers will depend on
a variety of factors, including the reliability, security, scalability and cost-
effectiveness of our products.

                                       8
<PAGE>

     We have a limited operating history which makes it difficult to predict
future operating results. We believe our success requires expanding our customer
base and continuing to enhance our BusinessWare products. We intend to continue
to invest significantly in sales, marketing and research and development and
expect to incur future operating losses. Our operating expenses are relatively
fixed and are based on anticipated revenue trends; a delay in the recognition of
revenue from one or more license transactions could cause significant variations
in operating results from quarter to quarter and could result in unforeseen
losses. Fees from contracts that do not meet our revenue recognition policy
requirements are recorded as deferred revenues. While a portion of our revenues
each quarter is recognized from deferred revenue, our quarterly performance will
depend primarily upon entering into new contracts to generate revenues for that
quarter. New contracts may not result in revenue during the quarter in which the
contract was signed, and we may not be able to predict accurately when revenues
from these contracts will be recognized. Our future operating results will
depend on many factors, including the following:

 .  size and timing of customer orders and product and service delivery;

 .  level of demand for our professional services;

 .  changes in the mix of our products and services;

 .  actions taken by our competitors, including new product introductions and
   pricing changes;

 .  costs of maintaining and expanding our operations;

 .  timing of our development and release of new and enhanced products;

 .  costs and timing of hiring qualified personnel;

 .  success in maintaining and enhancing existing relationships and
   developing new relationships with system integrators;

 .  technological changes in our markets, including changes in standards for
   computer and networking software and hardware;

 .  deferrals of customer orders in anticipation of product enhancements or
   new products;

 .  delays in our ability to recognize revenue as a result of the decision by
   our customers to postpone software delivery;

 .  customer budget cycles and changes in these budget cycles;

 .  costs related to acquisition of technologies or businesses.

                                       9
<PAGE>

RESULTS OF OPERATIONS

     The following table sets forth the results of operations for the three
months ended March 31, 2000 and March 31, 1999 expressed as a percentage of
total revenues.

     Results of Operations Table

      As a percent of revenues

<TABLE>
<CAPTION>
                                                      Three months ended
                                                           March 31,
                                                    2000            1999
                                                ------------     -----------
<S>                                             <C>              <C>
Revenues
 License                                                  80%             67%
 Service                                                  20%             28%
 Government grant                                          0%              5%
                                                ------------     -----------
Total revenues                                           100%            100%


Cost of sales
 License                                                   2%              1%
 Service                                                  18%             25%
 Government grant                                          0%              5%
                                                ------------     -----------
Total cost of sales                                       20%             31%
                                                ------------     -----------

Gross profit                                              80%             69%

Operating expense
 Sales and marketing                                      57%             55%
 Research and development                                 25%             38%
 General and administrative                               11%             14%
 Amortization of stock-based compensation                  5%             17%
                                                ------------     -----------
Total operating expenses                                  98%            124%

Loss from operations                                     (18)%           (55)%
Other income, net                                          9 %             3%
                                                ------------     -----------
Net loss                                                  (9)%           (52)%
                                                ============     ===========
</TABLE>


Results of Operations
For the three months ended March 31, 2000 and 1999

REVENUES

     LICENSE.  License revenues increased 368% to $16.3 million in the quarter
ended March 31, 2000 from $3.5 million in the quarter ended March 31, 1999.
This increase was the result of the growth in the number of licenses to new
customers and to a higher average transaction size.  Our average transaction
size has increased due to larger deployments by customers.

     SERVICE. Service revenues increased 181% to $4.1 million in the quarter
ended March 31, 2000 from $1.5 in the quarter ended March 31, 1999. This
increase is due to the growth of maintenance, support and consulting

                                       10
<PAGE>

revenues associated with license agreements signed in earlier periods. We expect
these service revenues to continue to increase as we support new deployments of
our products.

     GOVERNMENT GRANT. Government grant revenues decreased 66% to $84,000 in the
quarter ended March 31, 2000 from $250,000 in the quarter ended March 31, 1999.
Government grant revenues vary from quarter to quarter based upon the extent to
which our internal development resources are deployed to work on activities
covered under the grants. We do not expect to receive future government grant
revenues other than from existing grants.

COST OF REVENUES

     LICENSE. Cost of license revenues consists of royalty payments to third
parties for technology incorporated into our product, which we began selling in
fiscal 1999.   Cost of license revenues were $383,000 in the quarter ended March
31, 2000, an increase of 518% from $62,000 in the quarter ended March 31, 1999.
The increase in cost of license revenues was attributable to increased sales of
products which incorporate third party technology.  We expect these costs to
increase in future quarters as license volume for these products increases.

     SERVICE. Cost of service revenues consists of salaries, facility costs, and
payments to third party consultants incurred in providing customer support,
training and implementation services.  Cost of service revenues were $3.6
million in the quarter ended March 31, 2000, an increase of  179% over cost of
service revenues of $1.3 million for the quarter ended March 31, 1999.  The
increase in the cost of service revenues was attributable to the hiring of
additional service personnel in anticipation of supporting a larger customer
base in future periods.  We expect that cost of service revenues will continue
to increase in dollar amount as we continue to expand our customer support
organization to meet anticipated customer demand.

     GOVERNMENT GRANT.  Under the terms of the government grants, we receive
reimbursements only for costs incurred in connection with related research
activities.  Consistent with the grant provisions, these charged costs are
exactly equal to the grant revenue recognized.


OPERATING EXPENSES

  SALES AND MARKETING EXPENSES.  Sales and marketing expenses consist of
salaries, commission, field office expenses, travel and entertainment and
promotional activities.  During the quarter ended March 31, 2000, sales and
marketing expenses were $11.7 million, an increase of  304% over sales and
marketing expenses of $2.9 million for the three months ended March 31, 1999.
The increase was attributable to the expansion of our direct sales force, fees
paid to partners assisting in closing new business and increased promotional
activity.  We expect that sales and marketing expenses will continue to increase
in dollar amounts as we continue to expand our sales and marketing efforts,
establish additional U.S. and international sales offices and increase
promotional activities.

     RESEARCH AND DEVELOPMENT.  Research and development expenses include costs
associated with the development of new products, enhancements to existing
products, and quality assurance activities. To date, all software development
costs have been expensed in the period incurred.  During the quarter ended March
31, 2000, research and development expenses were $5.3 million, an increase of
169% over research and development expenses of $2.0 million for the three months
ended March 31, 1999.  The increase was attributable to an increase in the
number of research and development personnel and the use of independent
contractors. We anticipate that we will continue to devote substantial resources
to research and development and that these expenses will continue to increase in
absolute dollars.

                                       11
<PAGE>

     GENERAL AND ADMINISTRATIVE. General and administrative expenses consist of
salaries for administrative, executive and finance personnel, information
systems costs, professional service fees and allowances for doubtful accounts.
During the quarter ended March 31, 2000, general and administrative expenses
were $2.2 million, an increase of 202% over general and administrative expenses
of $726,000 for the three months ended March 31, 1999. The increase was
attributable to an increase in personnel expense and to an increase in our
allowance for doubtful accounts. Personnel expenses increased due to hiring
additional staff. Our allowance for doubtful accounts has increased as our
receivable balances have increased; receivable balances have doubled from the
quarter ended March 31, 1999. We believe that our general and administrative
expenses will continue to increase in absolute dollars as a result of our
growing operations and the expenses associated with operating as a public
company.

     AMORTIZATION OF STOCK-BASED COMPENSATION. Deferred stock based compensation
primarily represents the difference between the exercise price and the deemed
fair value of our common stock on the date certain stock options were granted
while we were a private company. This difference is amortized over a five year
period starting on the date the options were granted.   Unearned compensation
expense will be reduced for future periods to the extent that options are
terminated prior to full vesting.  During the quarter ended March 31, 2000,
amortization of stock-based compensation expenses was $1.1 million, an increase
of 23% over amortization of stock-based compensation expenses of $867,000 for
the three months ended March 31, 1999. The increase is due to additional options
granted during the period between March 31, 1999 and our initial public offering
on September 17, 1999.

     OTHER INCOME, NET.  Other income, net consists of interest income.   Other
income, net increased by 1382% to $1.9 million in the quarter ended March 31,
2000 from $129,000 in the quarter ended March 31, 1999.  The increase was due to
increased interest income on the proceeds from our initial public offering in
September, 1999 and the follow-on offering in February, 2000.

LIQUIDITY AND CAPITAL RESOURCES

     As of March 31, 2000, we have $188 million in cash and cash equivalents,
$59 million in short-term investments and $224 million in working capital with
no outstanding long-term debt.

     Net cash generated in operating activities was $12.0 million for the three
months ended March 31, 2000.  Net cash used in operating activities was $1.5
million for the three months ended March 31, 1999. Compared with the same period
a year ago, net cash flows generated in operating activities in 2000 reflects a
decrease in net loss, a substantial increase in deferred revenue partially
offset by an increase in accounts receivable, and an increase in accrued
liabilities partially offset by an increase in other current assets.

     Net cash used in investing activities was $47.4 million in the three months
ended March 31, 2000 and $299,000 in the three months ended March 31, 1999. Of
this increase in net cash used in investing activities, approximately $46
million is from purchasing investments with the cash received from our initial
and follow-on public offerings. The remainder of the increase is due to
purchasing fixed assets. We expect that capital expenditures will continue to
increase to the extent we continue to increase the number of people we employ
and expand our operations.

     Net cash generated from financing activities was $171.2 million in the
three months ended March 31, 2000, primarily from the net proceeds of our
follow-on public offering.  Net cash provided by financing activities was
$476,000 in the three months ended March 31, 1999, primarily from net proceeds
from the issuance of convertible preferred stock.

     We expect to experience a significant growth in our operating expenses for
the forseeable future in order to execute our business plan.  As a result, we
anticipate that operating expenses and planned capital expenditures will

                                       12
<PAGE>

constitute a material use of our cash resources. In addition, we may utilize
cash resources to fund acquisitions or investments in other businesses,
technologies or product lines. We believe that available cash and cash
equivalents including the net proceeds from the initial public offering and our
follow-on public offering will be sufficient to meet our working capital and
operating expense requirements for at least the next twelve months. Thereafter,
we may require additional funds to support our working capital and operating
expense requirements, or for other purposes and may seek to raise these
additional funds through public or private debt or equity financings. There can
be no assurance that this additional financing will be available, or if
available, will be on reasonable terms and not dilutive to our stockholders.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

     We are exposed to interest rate risk on our investments of excess cash. The
primary objective of our investment activities is to preserve principal while at
the same time maximizing yields without significantly increasing risk. To
achieve this objective, we invest in highly liquid and high quality debt
securities. To minimize the exposure due to adverse shifts in interest rates, we
invest in short-term securities with maturities of less than one year. If a one
percentage point change in interest rates were to have occurred on March 31,
2000, such a change would not have had a material effect on the fair value of
our investment portfolio as of that date. Due to the nature of our short-term
investments, we have concluded that we do not have a material financial market
risk exposure.

Business Risks

SINCE OUR SHORT OPERATING HISTORY MAKES IT DIFFICULT TO EVALUATE OUR PROSPECTS,
OUR FUTURE FINANCIAL PERFORMANCE MAY DISAPPOINT SECURITIES ANALYSTS OR INVESTORS
AND RESULT IN A DECLINE IN OUR STOCK PRICE.

     We were incorporated in October 1994. Until November 1997, we were engaged
primarily in research and development of our initial product. We licensed our
first product in November 1997 and have only recently established sales and
service organizations. Because of our limited operating history, we have limited
insight into trends that may emerge in our market and affect our business. The
revenue and income potential of our market are unproven. As a result of our
limited operating history, we have limited financial data that you can use to
evaluate our business. You must consider our prospects in light of the risks,
expenses and challenges we might encounter because we are at an early stage of
development in a new and rapidly evolving market.

WE HAVE A LARGE ACCUMULATED DEFICIT, WE EXPECT FUTURE LOSSES, AND WE MAY NOT
ACHIEVE OR MAINTAIN PROFITABILITY.

     We have incurred substantial losses since inception as we funded the
development of our products and technologies, and through our efforts to expand
our sales and marketing organization. Our net loss for 1999 was $16.0 million,
and our net loss for the three months ended March 31, 2000 was $1.8 million. As
of March 31, 2000, we had an accumulated deficit of $26.2 million. We intend to
continue to invest heavily in sales, marketing and research and development. As
a result, we will need to significantly increase our quarterly revenues to
achieve profitability. We cannot predict when we will operate profitably, if at
all.

OUR OPERATING RESULTS FLUCTUATE SIGNIFICANTLY AND AN UNANTICIPATED DECLINE IN
REVENUE MAY DISAPPOINT SECURITIES ANALYSTS OR INVESTORS AND RESULT IN A DECLINE
IN OUR STOCK PRICE.

                                       13
<PAGE>

     Although we have had significant revenue growth in recent quarters, our
growth rates may not be sustainable and prospective investors should not use
these past results to predict future operating margins or results. Our quarterly
operating results have fluctuated significantly in the past and may vary
significantly in the future. If our operating results are below the expectations
of securities analysts or investors, our stock price is likely to decline. We
believe that period-to-period comparisons of our historical results of
operations are not a good predictor of our future performance.

     Our revenues and operating results depend upon the volume and timing of
customer orders and payments and the date of product delivery. Historically, a
substantial portion of revenues in a given quarter have been recorded in the
third month of that quarter, with a concentration of these revenues in the last
two weeks of the third month. We expect this trend to continue and, therefore,
any failure or delay in the closing of orders would have a material adverse
effect on our quarterly operating results. Since our operating expenses are
based on anticipated revenues and because a high percentage of these expenses
are relatively fixed, a delay in the recognition of revenue from one or more
license transactions could cause significant variations in operating results
from quarter to quarter and cause unexpected results.

     Our quarterly results will depend primarily upon entering into new
contracts to generate revenues for that quarter. New contracts may not result in
revenue in the quarter in which the contract was signed, and we may not be able
to predict accurately when revenues from these contracts will be recognized.

OUR PRODUCT MAY NOT ACHIEVE MARKET ACCEPTANCE, WHICH COULD CAUSE OUR REVENUES TO
DECLINE.

     The limited sales and deployment of our product, and limited acceptance of
process automation technology, makes our prospects difficult to predict. In
addition, we have only licensed our product to a small number of customers, and
only a portion of these customers have commenced commercial deployment. The
deployment of our product requires interoperability with a variety of software
applications and systems and, in some cases, the ability to process a high
number of transactions per second. If our product fails to satisfy these
demanding technological objectives, our customers will be dissatisfied and we
may be unable to generate future sales. Failure to establish a significant base
of customer references will significantly reduce our ability to license our
product to additional customers.

OUR REVENUES WILL LIKELY DECLINE IF WE DO NOT DEVELOP AND MAINTAIN SUCCESSFUL
RELATIONSHIPS WITH SYSTEM INTEGRATORS.

     System integrators install and deploy our products and those of our
competitors, and perform custom integration of systems and applications. Some
system integrators engage in joint marketing and sales efforts with us. If these
relationships fail, we will have to devote substantially more resources to the
sales and marketing, and implementation and support of our product than we would
otherwise, and our efforts may not be as effective as those of the system
integrators. In many cases, these parties have extensive relationships with our
existing and potential customers and influence the decisions of these customers.
We rely upon these firms for recommendations of our product during the
evaluation stage of the purchasing process, as well as for implementation and
customer support services. A number of our competitors have stronger
relationships with these system integrators and, as a result, these system
integrators may be more likely to recommend competitors' products and services.
In addition, a number of our competitors have relationships with a greater
number of these system integrators and, therefore, have access to a broader base
of enterprise customers. Our failure to establish or maintain these
relationships would significantly harm our ability to license and successfully
implement our software product. In addition, we rely on the industry expertise
and reach of these firms. Therefore, this failure would also harm our ability to
develop industry-specific products. We are currently investing, and plan to
continue to invest, significant resources to develop these relationships. Our
operating results could be adversely affected if these efforts do not generate
license and service revenues necessary to offset this investment.

                                       14
<PAGE>

WE MAY SUFFER PRODUCT DEPLOYMENT DELAYS, A LOWER QUALITY OF CUSTOMER SERVICE AND
INCREASED EXPENSES IF SUFFICIENT SYSTEM INTEGRATOR IMPLEMENTATION TEAMS ARE NOT
AVAILABLE.

     System integrators help our customers install and deploy our product. These
system integrators are not contractually required to implement our product, and
competition for these resources may preclude us from obtaining sufficient
resources to provide the necessary implementation services to support our needs.
If the number of installations of our product exceeds our access to the
resources provided by these system integrators, we will be required to provide
these services internally, which would significantly limit our ability to meet
our customers' implementation needs and increase our expenses. In addition, we
cannot control the level and quality of service provided by our current and
future implementation partners.

BECAUSE A SMALL NUMBER OF CUSTOMERS HAVE AND ARE LIKELY TO CONTINUE TO ACCOUNT
FOR A SUBSTANTIAL PORTION OF OUR REVENUES, OUR REVENUES COULD DECLINE DUE TO THE
LOSS OR DELAY OF A SINGLE CUSTOMER ORDER.

     A relatively small number of customers account for a significant portion of
our total revenues. In 1999, sales to our ten largest customers accounted for
49% of total revenues. In the three months ended March 31, 2000, sales to our
ten  largest customers accounted for 45% of total revenues.   However, no one
single customer accounted for more than 10% of revenue in the three months ended
March 31, 2000.

     Our license agreements do not generally provide for ongoing license
payments. Therefore, we expect that revenues from a limited number of new
customers will continue to account for a large percentage of total revenues in
future quarters. Our ability to attract new customers will depend on a variety
of factors, including the performance, quality, breadth and depth of our current
and future products. The loss or delay of individual orders could have a
significant impact on revenues and operating results. Our failure to add new
customers that make significant purchases of our product and services would
reduce our future revenues.

OUR MARKETS ARE HIGHLY COMPETITIVE AND, IF WE DO NOT COMPETE EFFECTIVELY, WE MAY
SUFFER PRICE REDUCTIONS, REDUCED GROSS MARGINS AND LOSS OF MARKET SHARE.

     The market for our product is intensely competitive, evolving and subject
to rapid technological change. The intensity of competition is expected to
increase in the future. Increased competition is likely to result in price
reductions, reduced gross margins and loss of market share, any one of which
could significantly reduce our future revenues. Our current competitors include:

     EAI VENDORS. We face competition from vendors offering Enterprise
Application Integration, or EAI, software products. These vendors include Active
Software, Inc., CrossWorlds Software, Inc., and New Era of Networks, Inc., also
known as NEON. A number of other companies are offering products that address
different aspects of our solution, including Tibco Software, Inc., BEA Systems,
Inc., WebMethods, Inc., Sun Microsystems, Inc. and IBM Corporation.  In the
future, some of these companies may expand their products to enhance existing,
or to provide, process automation and real-time analysis functionality.

     INTERNAL IT DEPARTMENTS. "In house" information technology departments of
potential customers have developed or may develop systems that provide for some
or all of the functionality of our BusinessWare product. We expect that
internally developed application integration and process automation efforts will
continue to be a principal source of competition for the foreseeable future. In
particular, it can be difficult to sell our product to a potential customer
whose internal development group has already made large investments in and
progress towards completion of systems that our product is intended to replace.

                                       15
<PAGE>

   OTHER SOFTWARE VENDORS. We may in the future also encounter competition from
major enterprise software developers including Oracle Corporation, PeopleSoft,
Inc., and SAP AG. In addition, Microsoft Corporation has announced its intention
to introduce products which could compete with some aspects of our product.
These companies have significantly greater resources than Vitria.

     Many of our competitors have more resources and broader customer
relationships than we do. In addition, many of these competitors have extensive
knowledge of our industry. Current and potential competitors have established or
may establish cooperative relationships among themselves or with third parties
to offer a single solution and increase the ability of their products to address
customer needs.

     Although we believe that our solutions generally compete favorably with
respect to these factors, our market is relatively new and is evolving rapidly.
We may not be able to maintain our competitive position against current and
potential competitors, especially those with significantly greater resources.

WE EXPERIENCE LONG AND VARIABLE SALES CYCLES, WHICH COULD HAVE A NEGATIVE IMPACT
ON OUR RESULTS OF OPERATIONS FOR ANY GIVEN QUARTER.

     Our product is often used by our customers to deploy mission-critical
solutions used throughout their organization. Customers generally consider a
wide range of issues before committing to purchase our product, including
product benefits, ability to operate with existing and future computer systems,
ability to accommodate increased transaction volume and product reliability.
Many customers will be addressing these issues for the first time. As a result,
we or other parties, including system integrators, must educate potential
customers on the use and benefits of our product and services. In addition, the
purchase of our product generally involves a significant commitment of capital
and other resources by a customer. This commitment often requires significant
technical review, assessment of competitive products, and approval at a number
of management levels within the customer's organization. Because of these
issues, our sales cycle has ranged from two to nine months and is difficult to
predict for any particular license transaction.

THE COST AND DIFFICULTIES OF IMPLEMENTING OUR PRODUCT COULD SIGNIFICANTLY HARM
OUR REPUTATION WITH CUSTOMERS, DIMINISHING OUR ABILITY TO LICENSE ADDITIONAL
PRODUCTS TO OUR CUSTOMERS.

     Our product is often purchased as part of large projects undertaken by our
customers. These projects are complex, time consuming and expensive. Failure by
customers to successfully deploy our product, or the failure by us or third-
party consultants to ensure customer satisfaction, could damage our reputation
with existing and future customers and reduce future revenues. In many cases,
our customers must interact with, modify, or replace significant elements of
their existing computer systems. The costs of our product and services represent
only a portion of the related hardware, software, development, training and
consulting costs. The significant involvement of third parties, including system
integrators, reduces the control we have over the implementation of our product
and the quality of customer service provided to organizations which license our
software.

OUR SALES ARE CONCENTRATED IN THE TELECOMMUNICATIONS, SUPPLY CHAIN AND FINANCIAL
SERVICES INDUSTRIES AND IF OUR CUSTOMERS IN THESE MARKETS DECREASE THEIR
INFORMATION TECHNOLOGY SPENDING, OR WE FAIL TO PENETRATE OTHER INDUSTRIES, OUR
REVENUES MAY DECLINE.

     We expect to continue to direct our sales and marketing efforts toward
companies in the telecommunications, supply chain and financial services
industries. Sales to customers in the telecommunications, supply chain and
financial services industries accounted for 92% of total revenues in the three
months ended March 31, 2000. If we fail to penetrate these vertical markets our
operating results may suffer. Given our limited market penetration, the high
degree of competition and the rapidly changing environment in these industries,
there is no assurance that we will be able to continue sales in these industries
at current levels.

                                       16
<PAGE>

In addition, we intend to market our product in new vertical markets. Customers
in these new vertical markets are likely to have different requirements and may
require us to change our product design or features, sales methods, support
capabilities or pricing policies. If we fail to successfully address these new
vertical markets we may experience decreased sales in future periods.

IF WE ARE NOT SUCCESSFUL IN DEVELOPING PACKAGED VERSIONS OF OUR PRODUCT, OUR
ABILITY TO INCREASE FUTURE REVENUES COULD BE HARMED.

     We intend to develop packaged versions of our product which incorporate
business processes of specific industries, including telecommunications,
supply chain and financial services. This presents technical challenges and
will require collaboration with system integrators and the commitment of
significant resources. If we are not successful in developing these targeted
products or these products do not achieve market acceptance, our ability to
increase future revenues could be harmed.

OUR OPERATING RESULTS ARE SUBSTANTIALLY DEPENDENT ON LICENSE REVENUES FROM ONE
PRODUCT AND OUR BUSINESS COULD BE MATERIALLY HARMED BY FACTORS THAT ADVERSELY
AFFECT THE PRICING AND DEMAND FOR OUR PRODUCT.

     Since 1998 a majority of our total revenues has been, and is expected to
be, derived from the license of our BusinessWare product. Accordingly, our
future operating results will depend on the demand for BusinessWare by future
customers, including new and enhanced releases that are subsequently introduced.
If our competitors release new products that are superior to BusinessWare in
performance or price, or we fail to enhance BusinessWare and introduce new
products in a timely manner, demand for our product may decline. A decline in
demand for BusinessWare as a result of competition, technological change or
other factors would significantly reduce our revenues.

IF OUR PRODUCT DOES NOT OPERATE WITH THE MANY HARDWARE AND SOFTWARE PLATFORMS
USED BY OUR CUSTOMERS, OUR BUSINESS MAY FAIL.

     We currently serve a customer base with a wide variety of constantly
changing hardware, packaged software applications and networking platforms. If
our product fails to gain broad market acceptance, due to its inability to
support a variety of these platforms, our operating results may suffer. Our
business depends, among others, on the following factors:

 .    our ability to integrate our product with multiple platforms and existing,
     or legacy, systems and to modify our product as new versions of packaged
     applications are introduced;

 .    the portability of our product, particularly the number of operating
     systems and databases that our product can source or target;

 .    our ability to anticipate and support new standards, especially Internet
     standards;

 .    the integration of additional software modules under development with our
     existing product; and

 .    our management of software being developed by third parties for our
     customers or use with our product.

                                       17
<PAGE>

IF WE FAIL TO INTRODUCE NEW VERSIONS AND RELEASES OF OUR PRODUCT IN A TIMELY
MANNER, OUR REVENUES MAY DECLINE.

     We may fail to introduce or deliver new products on a timely basis, if at
all. In the past, we have experienced delays in the commencement of commercial
shipments of our BusinessWare product. To date, these delays have not had a
material impact on our revenues. If new releases or products are delayed or do
not achieve market acceptance, we could experience a delay or loss of revenues
and cause customer dissatisfaction. In addition, customers may delay purchases
of our product in anticipation of future releases. If customers defer material
orders in anticipation of new releases or new product introductions, our
revenues may decline.

OUR PRODUCT RELIES ON THIRD-PARTY PROGRAMMING TOOLS AND APPLICATIONS.   IF WE
LOSE ACCESS TO THESE TOOLS AND APPLICATIONS, OR ARE UNABLE TO MODIFY OUR PRODUCT
IN RESPONSE TO CHANGES IN THESE TOOLS AND APPLICATIONS, OUR REVENUES COULD
DECLINE.

     Our programs utilize Java programming technology provided by Sun
Microsystems. We also depend upon access to the interfaces, known as "APIs,"
used for communication between external software products and packaged
application software. Our access to APIs of third-party applications are
controlled by the providers of these applications. If the application provider
denies or delays our access to APIs, our business may be harmed. Some
application providers may become competitors or establish alliances with our
competitors, increasing the likelihood that we would not be granted access to
their APIs. In addition, we license technology related to the connectivity of
our product to third-party database and other applications. Loss of the ability
to use this technology, delays in upgrades, or failure of these third parties to
support these technologies could cause our revenues to decline.

WE COULD SUFFER LOSSES AND NEGATIVE PUBLICITY IF NEW VERSIONS AND RELEASES OF
OUR PRODUCT CONTAIN ERRORS OR DEFECTS.

     Our product and its interactions with customers' software applications and
IT systems are complex and, accordingly, there may be undetected errors or
failures when products are introduced or as new versions are released. We have
in the past discovered software errors in our new releases and new products
after their introduction which has resulted in additional research and
development expenses. To date, these additional expenses have not been material.
For example, we discovered problems with respect to the ability of software
written in Java to run sufficiently fast to meet the needs of users in some high
performance applications. These errors have resulted in product release delays,
delayed revenues and customer dissatisfaction. We may in the future discover
errors in new releases or new products after the commencement of commercial
shipments. Since many customers are using our product for mission-critical
business operations, any of these occurrences could seriously harm our business
and generate negative publicity.

OUR GROWTH CONTINUES TO PLACE A SIGNIFICANT STRAIN ON OUR MANAGEMENT SYSTEMS AND
RESOURCES AND IF WE FAIL TO MANAGE OUR GROWTH OUR ABILITY TO MARKET AND SELL OUR
PRODUCT AND DEVELOP NEW PRODUCTS MAY BE HARMED.

     We must plan and manage our growth effectively in order to offer our
product and services and achieve revenue growth and profitability in a rapidly
evolving market. Our growth has and will continue to place a significant strain
on our management systems and resources, and we may not be able to effectively
manage our growth in the future. We continue to increase domestically, and to a
lesser extent internationally, the scope of our operations, and have added a
number of employees. For us to effectively manage our growth, we must continue
to do the following:

 . improve our operational, financial and management controls;

 . improve our reporting systems and procedures;

                                       18
<PAGE>

 . install new management and information control systems; and

 . expand, train and motivate our workforce.

     In particular, we continue to add new software systems to complement and
enhance our existing accounting, human resource and sales and marketing software
systems. If we fail to install these systems in an efficient and timely manner,
or if the new systems fail to adequately support our level of operations, then
we could incur substantial additional expenses to remedy these failures.

IF WE DO NOT KEEP PACE WITH TECHNOLOGICAL CHANGE, OUR PRODUCT MAY BE RENDERED
OBSOLETE AND OUR OPERATING RESULTS MAY SUFFER.

     Our industry is characterized by very rapid technological change, frequent
new product introductions and enhancements, changes in customer demands and
evolving industry standards. Our existing product will be rendered obsolete if
we fail to introduce new products or product enhancements that meet new customer
demands, support new standards or integrate with new or upgraded versions of
packaged applications. We have also found that the technological life cycle of
our product is difficult to estimate. We believe that we must continue to
enhance our current product while we concurrently develop and introduce new
products that anticipate emerging technology standards and keep pace with
competitive and technological developments. Failure to do so will harm our
ability to compete. As a result, we are required to continue to make substantial
product development investments.

IF WE FAIL TO ATTRACT AND RETAIN QUALIFIED PERSONNEL, OUR ABILITY TO COMPETE
WILL BE HARMED.

     We depend on the continued service of our key technical, sales and senior
management personnel.  None of these persons are bound by an employment
agreement.  The loss of any of our senior management or other key research,
development, sales and marketing personnel could have a material adverse effect
on our future operating results.  In particular Dr. JoMei Chang, our President
and Chief Executive Officer, and Dr. M. Dale Skeen, our Chief Technology
Officer, would be difficult to replace.

     In addition, we must attract, retain and motivate highly skilled employees.
We face significant competition for individuals with the skills required to
develop, market and support our products and services. We cannot assure that we
will be able to recruit and retain sufficient numbers of these highly skilled
employees.

WE DEPEND ON THE INCREASING USE OF THE INTERNET AND ON THE GROWTH OF ELECTRONIC
COMMERCE. IF THE USE OF THE INTERNET AND ELECTRONIC COMMERCE DOES NOT GROW AS
ANTICIPATED, OUR REVENUES COULD DECLINE AND OUR BUSINESS WILL BE SERIOUSLY
HARMED.

     We depend on the increased acceptance and use of the Internet as a medium
for electronic commerce and the adoption by businesses of eBusiness solutions.
Rapid growth in the use of the Internet is a recent occurrence. As a result,
acceptance and use may not continue to develop at historical rates and a
sufficiently broad base of business customers may not adopt or continue to use
the Internet as a medium of commerce. Demand and market acceptance for recently
introduced services and products over the Internet are subject to a high level
of uncertainty, and there exist few proven services and products.

IF WE FAIL TO ADEQUATELY PROTECT OUR PROPRIETARY RIGHTS, WE MAY LOSE THESE
RIGHTS AND OUR BUSINESS MAY BE SERIOUSLY HARMED.

                                       19
<PAGE>

     We depend upon our ability to develop and protect our proprietary
technology and intellectual property rights to distinguish our product from our
competitor's products. The use by others of our proprietary rights could
materially harm our business. We rely on a combination of copyright, trademark
and trade secret laws, as well as confidentiality agreements and licensing
arrangements, to establish and protect our proprietary rights. We have no issued
patents. Despite our efforts to protect our proprietary rights, existing laws
afford only limited protection. Attempts may be made to copy or reverse engineer
aspects of our product or to obtain and use information that we regard as
proprietary. Accordingly, there can be no assurance that we will be able to
protect our proprietary rights against unauthorized third-party copying or use.
Furthermore, policing the unauthorized use of our product is difficult, and
expensive litigation may be necessary in the future to enforce our intellectual
property rights.

IF OUR SOURCE CODE IS RELEASED TO OUR CUSTOMERS, OUR ABILITY TO PROTECT OUR
PROPRIETARY RIGHTS COULD BE JEOPARDIZED AND OUR REVENUES COULD DECLINE.

     Some of our license agreements require us to place the source code for our
product in escrow. These agreements generally provide these customers with a
limited, non-exclusive license to use this code if:

 .  we fail to provide the product or maintenance and support;

 .  we cease to do business without a successor; or

 .  there is a bankruptcy proceeding by or against Vitria.

Our revenues could decline and our business could be seriously harmed if
customers were granted this access.

OUR PRODUCT COULD INFRINGE THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS CAUSING
COSTLY LITIGATION AND THE LOSS OF SIGNIFICANT RIGHTS.

     We expect that third parties may claim that we have infringed their current
or future intellectual property rights. We expect that software developers in
our market will increasingly be subject to infringement claims as the number of
products in different software industry segments overlap. Any claims, with or
without merit, could be time-consuming, result in costly litigation, prevent
product shipment or cause delays, or require us to enter into royalty or
licensing agreements, any of which could harm our business. Patent litigation in
particular has complex technical issues and inherent uncertainties. In the event
an infringement claim against us is successful and we cannot obtain a license on
acceptable terms or license a substitute technology or redesign our product to
avoid infringement, our business would be harmed. Furthermore, former employers
of our current and future employees may assert that our employees have
improperly disclosed to us or are using confidential or proprietary information.

WE MAY NOT SUCCESSFULLY ENTER INTERNATIONAL MARKETS OR GENERATE SIGNIFICANT
PRODUCT REVENUES ABROAD, WHICH COULD RESULT IN SLOWER REVENUE GROWTH AND HARM
OUR BUSINESS.

     We have recently opened offices in the United Kingdom, Japan and Germany
and intend to establish additional offices in Europe and the Asia Pacific
region. We anticipate devoting significant resources and management attention to
expanding international opportunities. There are a number of challenges to
establishing operations outside of the United States and we may be unable to
successfully generate significant international revenues. If we fail to
successfully establish our products in international markets, we could
experience slower revenue growth and our business could be harmed.

FAILURE OF OUR PROSPECTIVE INTERNET CUSTOMERS TO RECEIVE NECESSARY FUNDING COULD
HARM OUR BUSINESS.

                                       20
<PAGE>

     Our targeted customers include rapidly growing Internet companies.  Most
privately and publicly held Internet companies require outside cash sources to
continue operations.  To the extent additional funding is less available for
Internet companies as a result of a stock market decline or other factors,
demand for our products may decline significantly and thereby reduce our
revenues.

FAILURE TO RAISE ADDITIONAL CAPITAL OR GENERATE THE SIGNIFICANT CAPITAL
NECESSARY TO EXPAND OUR OPERATIONS AND INVEST IN NEW PRODUCTS COULD REDUCE OUR
ABILITY TO COMPETE AND RESULT IN LOWER REVENUES.

     We may need to raise additional funds, and we cannot be certain that we
will be able to obtain additional financing on favorable terms, or at all. If we
need additional capital and cannot raise it on acceptable terms, we may not be
able to, among other things:

 .    develop or enhance our products and services;

 .    acquire technologies, products or businesses;

 .    expand operations, in the United States or internationally;

 .    hire, train and retain employees; or

 .    respond to competitive pressures or unanticipated capital requirements.

Our failure to do any of these things could result in lower revenues and could
seriously harm our business

WE ARE AT RISK OF SECURITIES CLASS ACTION LITIGATION DUE TO OUR EXPECTED STOCK
PRICE VOLATILITY.

     In the past, securities class action litigation has often been brought
against a company following a decline in the market price of its securities.
This risk is especially acute for us because technology companies have
experienced greater than average stock price volatility in recent years and, as
a result, have been subject to, on average, a greater number of securities class
action claims than companies in other industries. We may in the future be the
target of similar litigation. Securities litigation could result in substantial
costs and divert management's attention and resources, and could seriously harm
our business.

WE HAVE IMPLEMENTED ANTI-TAKEOVER PROVISIONS WHICH COULD DISCOURAGE OR PREVENT A
TAKEOVER, EVEN IF AN ACQUISITION WOULD BE BENEFICIAL TO OUR STOCKHOLDERS.

     Provisions of our amended and restated certificate of incorporation and
bylaws, as well as provisions of Delaware law, could make it more difficult for
a third party to acquire us, even if doing so would be beneficial to our
stockholders. These provisions include:

 .    establishment of a classified board of directors requiring that not all
     members of the board may be elected at one time;

 .    authorizing the issuance of "blank check" preferred stock that could be
     issued by our board of directors to increase the number of outstanding
     shares and thwart a takeover attempt;

                                       21
<PAGE>

 .    prohibiting cumulative voting in the election of directors, which would
     otherwise allow less than a majority of stockholders to elect director
     candidates;

 .    limitations on the ability of stockholders to call special meetings of
     stockholders;

 .    prohibiting stockholder action by written consent, thereby requiring all
     stockholder actions to be taken at a meeting of our stockholders; and

 .    establishing advance notice requirements for nominations for election to
     the board of directors or for proposing matters that can be acted upon by
     stockholders at stockholder meetings.

     In addition, Section 203 of the Delaware General Corporations Law and the
terms of our stock option plans may discourage, delay or prevent a change in
control of Vitria.

                                       22
<PAGE>

                                    PART II
                               OTHER INFORMATION

1. Legal Proceedings.

None.

2. Changes in Securities and Use of Proceeds

     On February 11, 2000 Vitria commenced a follow-on public offering, at
$60.00 per share, of 3,000,000 shares of common stock, pursuant to a
registration statement on Form S-1 (Commission File No. 333-95319) declared
effective on February 11, 2000. The offering terminated following the sale of
all securities registered. The managing underwriters of the public offering were
Credit Suisse First Boston, Merrill Lynch, Robertson Stephens, and Wit
Soundview. The aggregate offering price of the shares offered by Vitria was
$180,000,000, less underwriting discounts and commissions of $8,100,000 and
expenses of approximately $700,000. The proceeds are to be used for general
corporate purposes, principally working capital, capital expenditures, potential
acquisitions and additional research and development, sales and marketing
efforts.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Submission of Matters to a Vote of Security Holders

None.

Item 5. Other Information

None.

Item 6. Exhibits and Reports on Form 8-K.

a)  Exhibits:

    10.1   Lease agreement dated March 20, 2000 between Opus/AEW Office
           Development Company, L.L.C. and Vitria Technology, Inc.

    27.1   Financial Data Schedule

b)  Vitria filed a report on Form 8-K dated March 23, 2000, in which Vitria
    announced a change in its independent accountants.

                                       23
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

May 12, 2000                                   Vitria Technology, Inc.

                                               By /s/ Paul R. Auvil, III
                                                  ----------------------
                                               Paul R. Auvil, III
                                               Vice President, Finance, Chief
                                               Financial
                                               Officer and Secretary

                                       24